1. Solar Energy Commercialization Session 11
SEC598S19
Solar Energy Commercialization
Session 11
Utility Scale Solar Development
Power Purchase Agreements
Design Issues
February 13, 2019

2. Session 11 - Value to class members
Once again, utility scale solar energy systems have unique features largely due to the magnitude of the projects, including land and power off-take issues
This session includes a review of Power Purchase Agreements and Design Issues

3. Utility Scale PV Systems
Design Steps
Selecting an appropriate site and solving all land issues
Carrying out the permitting process for construction and operation
Selecting a financing approach including power purchase agreements or energy off-take agreements
Carrying out PV system and solar field engineering and design
Interconnection to the grid

4. Utility Scale PV Systems
Power Purchase Agreement Resources
SEIA factsheet
NREL report (2014), To Own or Lease Solar
NREL report (2012), SW Utility PPAs
NREL report (2010), PPA Checklist

5. Utility Scale PV Systems
The Power Purchase Agreement
Importance to finance and valuation
It is an essential milestone in a renewable energy project’s development
The financial difference between a project with a PPA and a project without a PPA can be substantial
It is a binding contract between an electric utility and a project developer
It can be employed at the residential, commercial, and utility scales, with differences related to scale

6. Utility Scale PV Systems
The Power Purchase Agreement
Importance to finance and valuation
The utility commits to buy renewable power from the developer’s PV system for a duration of years
It defines the cash flow for an energy project
It is the reason why investors will evaluate the solar project for investment potential
Initial capital investment
Revenue over time
Level of risk

7. Utility Scale PV Systems
The Power Purchase Agreement
There are two versions of a PPA
A two party agreement in which one is a buyer of solar electrical power (the utility) and the other a seller of solar electrical power (the developer)
A three party agreement with a developer of a PV system, a host customer, and a utility

8. Utility Scale PV Systems
The Two Party Power Purchase Agreement
The developer generally forms a limited liability company (LLC)
The LLC owns the assets of the project:
Land site control
Permits
Solar generating equipment
Project engineering documentation
PPA contract
The LLC sells the electrical energy (in kWh) bundled with Renewable Energy Credits (RECs) and/or some other “green” credits

9. Utility Scale PV Systems
The Two Party Power Purchase Agreement
The price of the seller’s kWh may be a fixed cost or may follow a “time of delivery” payment structure
Seasonal, daily, hourly periods
The buyer receives the electricity along with the RECs which it uses to demonstrate that it is meeting the Renewable Energy Standards (RES) that the utility’s regulators have established

10. Utility Scale PV Systems
The Two Party Power Purchase Agreement
Both sides stipulate that they are
Good corporate citizens
Creditworthy
Capable of fulfilling their contractual obligations

11. Utility Scale PV Systems
The Two Party Power Purchase Agreement
Six key components of a PPA
The contract electricity price
The annual escalator
The term of the contract
The location of the generation station and the interconnection point
The description of the type of generation facility
Contract off-ramps (curtailment)

12. Utility Scale PV Systems
The Two Party Power Purchase Agreement
Financing considerations
Credit rating of the off-taker
Most utility companies have exceptional credit
Some small, private, or inexperienced off takers – not so much
Fatal financeability flaws
Curtailment – buyer excused from paying for energy if transmission system unavailable
Ambiguous regulation compliance payment terms – seller payments when regulations or laws change

13. Utility Scale PV Systems
The Two Party Power Purchase Agreement
PPA variables
NREL System Advisor Model (SAM) example
20 MWdc PV system, 20 year PPA, 0% escalator
17.4cents/kWh price needed to meet IRR
20 MWdc PV system, 20 year PPA, 2% escalator
13.4cents/kWh price needed to meet IRR
Dropping PV component costs
More competitive bids
More entrants
Adding an escalator or increasing contract term often produces lower energy prices than zero escalator or shorter term contracts – getting closer to grid parity

14. Utility Scale PV Systems
The Two Party Power Purchase Agreement
PPA commitments
Two riskiest elements
Guaranteed construction and operation dates
Guaranteed annual energy output
Delay clauses often included, but missing commercial operation date can trigger damage payments to the off-taker or lead to contract termination
Similar penalties for falling short in energy performance, but “development securities” often required

15. Third Party PPAs
(SEIA factsheet)

16. Third Party PPAs
(NREL 2010)

17. Third Party PPAs (NREL 2010)

18. The effect of escalator clauses

20. Utility Scale PV Systems
Design Steps
Selecting an appropriate site and solving all land issues
Carrying out the permitting process for construction and operation
Selecting a financing approach including power purchase agreements or energy off-take agreements
Carrying out PV system and solar field engineering and design
Interconnection to the grid

21. Utility Scale - Solar Farm Design
Steps in Solar Farm Design
Design calculations
Electrical design considerations
System monitoring
System equipment selection
Installation issues
Yield calculations

22. Solar Farm Design - Design calculations
Site Assessment – System Layout
Solar Farms
Chapter 4

23. Solar Farm Design - Design calculations
Site Assessment – System Layout
Effect of appurtenant structure
HELIOS shadow modeling
Solar Farms
Chapter 4

24. Solar Farm Design - Design calculations
Site Assessment – Solar Resource
Effect of tilt angle
Reduced energy harvesting with off-normal incidence
Solar Farms
Chapter 4

25. Solar Farm Design - Design calculations
Site Assessment – Solar Resource
Effect of tilt angle
Solar Farms
Chapter 4
Optimal tilt angle at the equinox

26. Solar Farm Design - Design calculations
Site Assessment – Solar Resource
Shadowing between rows

27. Solar Farm Design - Design calculations
Rule of thumb:
The rows of modules should be spaced so that there is no inter-row shading at solar noon on the winter solstice
Furthermore, as a general design rule, the rows should be spaced so that there is less than 1% annual loss due to shading
Solar Farms
Chapter 4

28. Solar Farm Design - Design calculations
Markvart, Solar Electricity, Fig 2.7b

29. Solar Farm Design - Design calculations
Shadowing between rows

30. Solar Farm Design - Design calculations
Peak Solar Hours (PSH)
GAM1.5 = 1000 W/m2
Messenger & Ventre, Fig 2.3